Monday, February 20, 2012

Safe Harbor Amendment battle heats up while condo and HOA owners watch and wait

The Senate counterpart to HB 319, SB 680 sponsored by Senator Bogdanoff, will be heard in the Senate Judiciary Committee today, Monday, February 20th at 10:30 am. It is anticipated that an amendment will be offered to add the "Safe Harbor clarification" to this bill to match what is already found in HB 319.

If such an amendment is offered and accepted, there is sure to be much hullabaloo to follow. We are already seeing the rhetoric ratcheting up in Social Media and other circles. Why?

Frankly, because there is a lot of money at stake. As with most crises, a cottage industry cropped up quickly after the real estate bubble burst. "Creative" collection companies began offering associations something that seemed too good to be true: no-risk collection work. How could they do that? By going after banks for all amounts owed and not just the 12 months' past due assessments or 1% of the original mortgage debt which is also known as the statutory Safe Harbor.

The amendment reiterating that a bank's liability is capped at the lesser of 12 months' past due assessments or 1% of the original mortgage debt that was added to HB 319 in its first committee, would stop some collection companies and attorneys from continuing to employ their current questionable practices. Is this pro-bank? It is certainly easy to spin it that way and adding words like "higher assessments" and "bank bailout" can sound convincing and scary. However, just how much risk to your association is truly involved with being aggressive on the statutory Safe Harbor provisions?

Originally, my instinct was to support associations making their own informed choices in this regard. However, just last week, a lawsuit was forwarded to me and my group, the Community Advocacy Network (CAN). This lawsuit had been filed by HSBC against a Tampa condominium association. Also last week, we received notice of a lawsuit filed by Pennymac Loan Servicing LLC filed against a Miami-Dade HOA. Why were these associations sued? They failed to stay within the statutory Safe Harbor boundaries. This begs the question of just how well informed associations have been when deciding to push the Safe Harbor envelope in the past.

Some weeks ago, CAN polled our members and others in the industry to gauge whether a clarification of Safe Harbor would be welcomed. Naturally, most folks would prefer to have the Safe Harbor limitation for banks eliminated entirely but that is not what is on the table this Session. What is on the table is whether or not the law should be clarified to ensure that all legal practicitioners color within the same lines.

Scare tactics and PR campaigns don't help associations or our elected officials make educated choices in this regard. A sound policy debate does. Whether or not the Safe Harbor amendments are added to SB 680 and remain on HB 319 is no longer the main issue here for associations. This Session's debate on this topic has revealed that banks who may have been unprepared or distracted in the past and paid amounts beyond the Safe Harbor, are not likely continue to do so in the future.

Moreover, depending on the cause of action a bank may bring, they may have years to go back after associations for amounts previously collected from them contrary to the Safe Harbor threshold as well as their attorney's fees and costs. In one of the lawsuits I reviewed, the bank refused to pay the amounts demanded by the association and lost the sale as a result. That bank is now seeking lost profits in addition to other damages, attorney's fees and costs.

At HB 319's first Committee stop, CAN lobbyists waived in support of the bill while not taking a stance on the Safe Harbor amendment. At today's stop, CAN's lobbyists will strongly support the inclusion of this Safe Harbor amendment for all the reasons stated above. Using scary catch phrases like "bank bailout" and "higher assessments" might sound convincing until a little more investigation is done into the policy, the settled law on the topic and the potential future risks.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Thursday, February 16, 2012

What is a Newcomer's First Impression of Your Community?

At some point, we were all the "newcomer" in our communities. Can you remember back to the day when you first moved into your condominium, cooperative or homeowners' association?

Your first introduction to your new neighbors might have come in the form of an application and a subsequent interview. Depending on how easy that application was to fill out and the nature of the person or persons who interviewed you, your impressions of your new community might vary widely.

The old saying that you only get one chance to make a first impression is particularly true when it comes to community associations. The approval process for new purchasers and renters as well as the first few weeks and months in a community, can set the tone for an enjoyable future that might include volunteering for the board or a committee or they can be unnecessarily traumatic.

In business, new hires are subjected to an "on-boarding" process in order to ensure that the new employee understands his or her job requirements and the company's expectations. A successful on-boarding process also is designed to teach the new employee a little bit about the company culture and to get them excited about the future and the opportunities it can bring.

I am always a little disappointed that more community associations don't approach the newcomer experience with that same approach in mind. This is your first opportunity to let new people know what is so great about your community, create a sense of excitement as well as inclusion while also letting them know "how things are done".

My first entree into the community association lifestyle was in a condominium association in Miami straight out of law school. The application was no problem at all. As a student, I was used to filling out form after form. The interview was a little trickier. My husband and I were scheduled and re-scheduled several times with little advance warning. When the day finally came, we met with only one member of the board and the least hospitable one at that. He looked at us both sternly and said, "If I like you, you will get to live here. If I don't, you won't."

Needless to say, our knees were both shaking but I suspect now that this board member was just having a little bit of fun at our expense. We were "approved" and went on to live in the community for 4 years. We had nice neighbors but we were left to meet them on our own. My husband went on to serve a term on the board but meetings were poorly attended and maintenance and management problems plagued the community.

My second act with community association membership came when we moved to a Broward County HOA. This time around, things were a lot more organized. The interview went well and was accompanied by a beautifully bound package containing the governing documents and branded rules and regulations. Within days of moving into our new home, we were greeted by a Welcome Committee with a nice basket of muffins and invited to a Newcomer's Social. This community has now been our home for almost two decades. There continues to be a strong sense of community and the thought that goes into welcoming and incorporating new members is evident.

Think back to your first days as a newcomer to your community and ask yourself what could have been done better. The answer to that question will help your community go on to create the newcomer protocol that can make the difference between a good community and a great one.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Monday, February 6, 2012

Disturbing new trend impacting associations: don't like a judicial decision ... just change the law!

Two recent legislative attempts signal a disturbing trend that has the potential to negatively impact Florida's community associations.

The first is this year's construction defect bill, HB 1013, sponsored by Representative Artiles and its Senate companion, SB 1196, sponsored by Senator Bennett. These bills would take away a homeowner's rights to pursue a developer for defects to the driveways, roads, sidewalks. utilities, drainage areas and other so-called "off-site" improvements that are not located on the lot on which a home is constructed or which are located on such a lot but do not contribute to the "habitability" of the home.

These bills are a knee-jerk reaction to the case of Lakeview Reserve HOA vs. Maronda Homes wherein the 5th DCA agreed that a homeowners' association has a right of implied warranty for improvements such as roads, driveways, etc. The case is now on appeal to the Florida Supreme Court but apparently, Florida developers are not content to wait and see if the Florida Supreme Court agrees with the 5th DCA.

The developers' lobby has not only managed to secure sponsors for these bills but when they ran up against opposition last week in the form of HB 1013 not being put on the agenda for the Business and Consumer Affairs Subcommittee chaired by Represenative Doug Holder, they got the bill re-referenced to the Judiciary Committee. For sports fans, this was a nice "end run" around Representative Holder's Committee.

The developers' lobby has been spinning these bills to our elected officials as the necessary antidote to safeguard future development in the State of Florida. The fact that new construction has been stalled for the last several years due to the economy and the inability to secure financing is apparently of no consequence. The entire problem seems to rest with the fact that the Maronda case would bankrupt developers who don't build defect-free roads and sidewalks.

The other legislative attempt to overturn a judicial decision came in the form of Miami-Dade County seeking to clarify that Public Housing Agencies are not required to tender Section 8 rent to associations demanding same from delinquent owner/landlords. This proposal flies in the face of an order issued last year by Judge Hoy in the 15th Judicial Circuit wherein the Palm Beach Housing Authority was required to tender its share of rent on behalf of a Section 8 tenant directly to the Willoughby Estates POA. This was a significant victory for the association since the PBHA's share of the rent was $1,509 while the tenant's share was only $275.00. The PBHA refused to comply with association's demand for rent until ordered to do so by Judge Hoy.

Fortunately, Miami-Dade County's attempt to reverse this ruling legislatively appears dead for the moment but it once again underscores the desires by some who find themselves on the losing end of a court battle to get a "do-over" via the Legislature.